Hey, welcome back for part two on my rant on mistakes to avoid when you’re buying foreclosed homes in Detroit for sale.
Click here if you missed part one.
Let’s finish up.
Make Sure You Have all the Money You’ll Need
Now this ties-into the first point I made in part one, regarding planning.
Simply put, you’d better make sure you have the cash to get the work done that’s necessary to get it back in living condition.
Imagine being a month into the rehab, only to run out of money, with a ton of crap left to be fixed.
It’s one of the worst feelings you’ll ever experience as an investor.
Don’t ask me how I know.
Before you make an offer, make sure you know whether or not you have enough to cover the expenses, plus a cushion for surprises and for holding costs.
As a rule of thumb, I’d always budget about 10 percent more into the rehab expenses, for unforeseen issues.
If you’re planning on reselling the property to an end buyer, you’d better have enough to carry that property for three-to-six months, at least.
A lot of mortgages require that the property be “seasoned.”
In other words, the previous owner has to be on the title for at least three months, before the mortgage company would be able to provide a mortgage for the new buyer.
You don’t want to be caught off-guard on this one.
Pre-Approval vs. Pre-Qualified
If you’re going to finance the foreclosed property, you need to give the realtor proof that you can buy it.
You want to give them a “Pre-Approval”, and not just a “Pre-Qualification” letter.
There’s a difference.
Now nine times out of ten, the realtor will catch this before they submit the offer.
But even if they do, making a mistake like this can make you look like a rookie in the eyes of the realtor.
To their credit, most Realtors are cool and above-board, but let’s be honest here; when it comes to making money, you can’t always rely on people to be ethical.
So do what you can to avoid looking like a novice.
Detroit is interesting to me, in that you can have a house on a “good block” that’s only one block away from a bad neighborhood.
Make sure you’re comfortable with the location of the property, and if you’re close to what looks to be a “bad neighborhood,” make sure you’re comfortable with it.
If you’re not, you might be in-store for some sleepless nights, when it’s sitting vacant. And if something happens, you might kick yourself for not listening to your gut before you bought the house.
Don’t Expect Much Help From Police
About ten years ago, my car was broken-into when I lived in Madison Heights, which is a suburb of Detroit.
Madison Heights police arrived on the seen within five minutes of me placing the call.
They dusted my car for finger prints, and the whole nine.
Now fast-forward about four years, to a Friday summer evening, when it was brought to my attention that one of my rental properties was vandalized in Detroit.
The bastards took my hot water tank and my furnace!
Just like when my car was broken into, I called 911.
Know what I was told by Detroit Police?
That I needed to come to the local station to file a police report!
I was pissed!
Moral of the story, is that something was to happen to your property, be prepared to see first-hand that the service you get from the Detroit Police isn’t going to be that good.
So keep that in mind.
If I sound bitter about this, it’s because I am.
To your success,
Do you have any other tips for people looking to buy foreclosures in the D? Leave a comment below.
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